hong kong rotary club students' loan fund · 2020. 4. 17. · hong kong rotary club...

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Hong Kong Rotary Club Students' Loan Fund

Financial statements for the year ended 31 August 2019

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Independent Auditor Report ’

To the Permanent Secretary for Education Incorporated

Opinion

『1

I certify that I have audited the financial statements of the Hong Kong Rotary Club Students' Loan Fund set out on pages 4 to 16, which comprise the balance sheet as at 31August2019, and the income and expenditure account, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In my opinion, the financial statements give a true and fair view of the financial position of the Hong Kong Rotary Club Students' Loan Fund as at 31 August 2019, and of its financial performance and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards (“HKFRSs ’,) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA ’,) and have been properly prepared in accordance with section 8(3) of the Permanent Secretary for Education Incorporation Ordinance (Cap. 1098).

Basis for opinion

I conducted my audit in accordance with section 8(5) of the Permanent Secretary for Education Incorporation Ordinance and the Audit Commission auditing standards. My responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of my report. I am independent of the Hong

‘ Kong Rotary Club Students' Loan Fund in accordance with those standards, and I have fulfilled my other ethical responsibilities in accordance with those standards. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my opinion.

Responsibilities of the Permanent Secretary for Education Incorporated for the financial s的tements

The Permanent Secretary for Education Incorporated is responsible for the preparation of the financial statements that give a true and fair view in accordance with HKFRSs issued by the

HKICPA and section 8(3）。fthe Permanent Secretary for Education Incorporation Ordinance, and for such internal control as the Permanent Secretary for Education Inc。中orated

determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Permanent '$ecretary for Education Incorporated is responsible for assessing the Hong Kong Rotary Club Students' Loan Fund’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting.

Auditor’s responsibilities for the audit of the financial s的tements

My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor ’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a gu訂antee that an audit conducted in accordance with the Audit Commission auditing standards will always detect a material misstatement when it exists. Misstatements can arise 仕om fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with the Audit Commission auditing standards, I exercise professional judgment and maintain professional skepticism throughout the audit. I also:

identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material misstatement resulting 仕om fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;

obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Hong Kong Rotary Club Students' Loan Fund’s internal control;

evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Permanent Secretary for Education Incorporated;

conclude on the appropriateness of the Permanent Secretary for Education Incorporated’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or

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conditions that may cast significant doubt on the Hong Kong Rotary Club Students' Loan Fund’s ability to continue as a going concern. If I conclude that a material uncertainty exists, I am required to draw attention in my auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify my opinion. My conclusions ary based on the audit evidence obtained up to the date of my auditor ’s report. H。你ever，如ture events or conditions may cause the Hong Kong Rotary Club Students' Loan Fund to cease to continue as a going concern; and

evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

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一 3 一

HONG KONG ROTARY CLUB STUDENTS’ LOAN FUND BALANCE SHEET AS AT 31AUGUST2019

可

Note 2019

HK$ Non-current assets

Interest-free loans 3 39,792

Current assets Interest－仕的 loans 3 Bank interest receivable 8,472 Fixed deposits 305,000 Cash and cash equivalents 4 138,359

451 831 , __________ ,.! _______

Total assets 491丘~3

Accumulated fund 49121._

The accompanying notes 1 to 8 form part of these financial statements.

(Mrs Ingrid Yeung) Permanent Secretary for Education Incorporated

Trustee,

（何呵Treasurer,

Hong Kong Rotary Club Students’ Loan Fund

Date: 1 4 FEB 2020

- 4 -

2018

HK$

19,111

27,048 3,887

277,950 155,875

46生760

483,871

4832871

HONG KONG ROTARY CLUB STUDENTS’ LOAN FUND INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED 31 AUGUST 2019

可

Note 2019

HK$ Income

Interest on bank deposits 8,689 Amortisation credit on interest-free loans 3

8,689

Expenditure

Amortisation charge on interest-free loans 3 (367) Bank charge _(5702

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Surplus for the year 7,752

Other comprehensive income

Total comprehensive income for the year 7,752


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2018

HK$

4,021 140

4,161

{7002

一一已.9Ql.3,461

3,461

HONG KONG ROTARY CLUB STUDENTS’ LOAN FUND STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 AUGUST 2019

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Balance at 1 September 2017

Total comprehensive income for 2017-18

Balance at 31 August 2018

Total comprehensive income for 2018-19

Balance at 31 August 2019


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Accumulated fund

HK.$

480,410

3,461

483,871

7,752

491 ,623

HONG KONG ROTARY CLUB STUDENTS’ LOAN FUND STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 AUGUST 2019

Nate

Cash flows from operating activities Surplus for the year A吐justments for :

Interest Amortisation charge/( credit) on interest-free loans Decrease in interest－企ee loans

Net cash from operating activities

Cash flows from investing activities Net increase in bank deposits with original

maturities over 3 months Interest received

Net cash (used in)/from investing activities

Net (decrease)/increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

2019 2018

HK$ HK$

7,752 3,461

(8,689) 367

6,000

5,430

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(27,050) (3,729) 4,104 3,731

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(17,516) 8,022

155,875 147,853

138,359 155,875


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1. General

HONG KONG ROT ARY CLUB STUDENTS’ LOAN FUND

NOTES TO THE FINANCIAL STATEMENTS

The Hong Kong Rotary Club Students' Loan Fund (the Fund) was established for the purpose

of granting interest-free loans to assist certain persons resident in Hong Kong in pursuing

courses of study in places of higher education in Hong Kong in accordance with the Trust

Deed made by the then Director of Education Incorporated on 1February1964.

The address of the Fund’s principal place of business is 12th Floor Cheung Sha Wan

Government Offices, 303 Cheung Sha Wan Road, Kowloon.

2. Significant Accounting Policies

(a) Statement of compliance

The financial statements of the Fund have been prepared in accordance with section 8(3)

of the Permanent Secretary for Education Incorporation Ordinance (Cap. 1098) and all

applicable Hong Kong Financial Reporting Standards (HKFRSs) issued by the Hong

Kong Institute of Certified Public Accountants (HKICPA).

The HKICP A has issued certain new and revised HKFRSs that are first effective or

available for early adoption for the current accounting period of the Fund. Note 2(c)

provides information on any changes in accounting policies resulting from initial

application of these developments to the extent that they are relevant to the Fund for the

current and prior accounting periods reflected in these financial statements.

(b) Basis of preparation of the financial statements

The financial statements have been prepared on an accrual basis and under the historical

cost convention.

The preparation of financial statements in conformity with HKFRSs requires

management to make judgements, estimates and assumptions that affect the application

of policies and reported amounts of assets, liabilities, income and expenditure. The

estimates and associated assumptions are based on experience and various other factors

that are believed to be reasonable under the circumstances, the results of which form the

basis for making judgements, about the carrying values of assets and liabilities that are

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HONG KONG ROTARY CLUB STUDENTS’ LOAN FUND


not readily apparent 企om other sources. Actual results may differ fr。m these

estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis.

Revisions to accounting estimates are recognised in the period in which the estimate is

revised if the revision affects only that period, or in the period of the revision and future

periods if the revision affects both current and future periods.

( c) Changes in accounting policies

The HKICP A has issued a number of new HKFRSs and amendments to HKFRSs that

are first effective for the current accounting period of the Fund. Of these, the Fund has

adopted the requirements of HKFRS 9 “Financial Instruments" from 1 September 2018.

HKFRS 9 replaces Hong Kong Accounting Standard (HKAS) 39 “Financial Instruments:

Recognition and Measurement’,. It sets out the requirements for recognising and

measuring financial assets, financial liabilities and some contracts to buy or sell

non-financial items.

The Fund has applied HKFRS 9 retrospectively to items that existed as at

1 September 2018 in accordance with the transition requirements without restating

comparative information (i.e. the comparative information continues to be reported

under HKAS 39). The carrying amounts of the items as at I September 2018 have not

been impacted by the initial application of HKFRS 9.

Further details of the nature and effect of the changes to previous accounting policies

are set out below:

(i) Classification of financial assets

HKFRS 9 categorises financial assets into three principal classification categories:

measured (i）的 amortised cost; (ii) at fair value through other comprehensive income;

and (iii) at fair value through profit or loss. These supersede HKAS 39's categories

of held-to-maturity investments, loans and receivables, available-for-sale financial

assets and financial assets at fair value through profit or loss. The classification of

financial assets under HKFRS 9 is based on the business model under which the

financial asset is managed and its contractual cash flow characteristics.

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The Fund's financial assets, comprising interest-free loans, bank interest receivable,

fixed deposits and cash and cash equivalents, were previously classified as loans and 呵，

receivables carried at amortised cost under HKAS 39. They were reclassified to

financial assets measured at amortised cost under HKFRS 9. The carηing amounts

of the Fund’s financial assets as at 1 September 2018 were the same as those as at

31August2018.

(ii) Credit losses and impairment

HKFRS 9 replaces the “incurred loss" model in HKAS 39 with the “expected credit

loss" model. The expected credit loss model requires an ongoing measurement of

credit risk associated with a financial asset and therefore recognises expected credit

losses earlier than under the “incurred loss" accounting model in HKAS 39. The

Fund applies the new expected credit loss model to the financial assets measured at

amortised cost. The initial application of the new impairment requirements had no

impact on the carrying amounts of the financial assets as at 1 September 2018.

(d) Financial assets

(i) Initial recognition

Financial assets are recognised on the date the Fund becomes pa此y to the

contractual provisions of the financial instruments. They are initially stated at fair

value plus transaction costs that are directly attributable to the acquisition of

financial assets.

(ii) Categorisation and subsequent measurement from 1 September 2018

Financial assets measured at amortised cost

These comprise interest-free loans, bank interest receivable, fixed deposits and cash

and cash equivalents. They are held for the collection of contractual cash flows

which represent solely payments of principal and interest. They are subsequently

measured at amortised cost, net of loss allowance, if any (note 2(d）。））. For

interest-free loans, they are non-derivative financial assets with fixed or

determinable payments that are not quoted in the active market. They are classified

as non-cuηent assets, except for those with maturities less than 12 months after the

reporting date which are classified as current assets.

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HONG KONG ROT ARY CLUB STUDENTS’ LOAN FUND


(iii) Categorisation and subsequent measurement before 1 September 2018

The Fund’s financial assets included interest-free loans, bank interest receivable, 、fixed deposits and cash and cash equivalents. They were carried at amortised cost

using the effective interest method less impairment losses, if any (note 2(d)(vi)).

(iv) Derecognition

A financial asset is derecognised when the contractual rights to receive the cash

flows from the financial asset expire, or where the financial asset together with

substantially all the risks and rewards of ownership have been transferred.

(v) Impairment of financial assets from 1 September 2018

For interest-free loans, bank interest receivable, fixed deposits and cash and cash

equivalents, the Fund measures the expected credit losses to determine the loss

allowance required to be recognised.

Expected credit losses are a probability-weighted estimate of credit losses. They

are based on the difference between the contractual cash flows due in accordance

with the contract and the cash flows that the Fund expects to receive, discounted at

the effective interest rate. They are measured on either of the following bases: .

12-month expected credit losses (for financial instruments for which there has

not been a significant increase in credit risk since initial recognition): these are

losses that are expected to result 企om possible default events within the 12

months a丘er the reporting date; or

lifetime expected credit losses (for financial instruments for which there has

been a significant increase in credit risk since initial recognition): these are

losses that are expected to result from all possible default events over the

expected life of the financial instrument.

In assessing whether the credit risk of a financial instrument has increased

significantly since initial recognition, the Fund compares the risk of default

occurring on the financial instrument assessed at the reporting date with that

assessed at the date of initial recognition. In making this assessment, the Fund

considers that a default event occurs for a financial asset (excluding interest-free

loans) when (i) the borrower is unlikely to pay its credit obligations to the Fund in

full; or (ii) the contractual payments are 90 days past due; and for interest-free loans,

a default event occurs when the borrower is unable to settle the overdue instalments

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/

’ HONG KONG ROTARY CLUB STUDENTS’ LOAN FUND


for more than six months. The Fund considers both quantitative and qualitative

information that is reasonable and supportable, including historical experience and 電

forward-looking information that is available without undue cost or effort. A

financial asset is written off when there is no reasonable expectation of recovering

the contractual cash flows.

(vi) Impairment of financial assets before 1 September 2018

An impairment of interest-free loans was established when there was objective

evidence that the Fund would not be able to collect all amounts due according to the

original terms of loans. An impairment loss was the difference between the asset’s

carrying amount and the present value of estimated future cash flows, discounted at

the asset’s original effective interest rate. Impairment losses were recognised in the

income and expenditure account.

For loans which had been overdue for more than six months, provision for bad and

doubtful debts would be made at the end of the financial year for an amount of 50%

of the outstanding balances of these loans.

( e) Revenue recognition

Interest income is recognised as it accrues using the effective interest method.

(f) Cash and cash equivalents

Cash and cash equivalents comprise cash at banks and deposits with banks with original

maturities of three months or less from the date of placement.

” 12 且

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4.



Interest-free Loans

呵，

2019

HK$

Balance at beginning of year 50,400

Loans granted during the year 22,400

Loans repaid during the year (28,400)

44,400

Amortisation charge at beginning of year (4,241)

Amortisation (charge) I credit for the year (367)

2018

HK$

59,120

31,900

(40,620)

50,400

(4,381)

140

Amortisation charge at end of year ___ ｛~乏Q~﹜一．．一一斗也投！上．

Balance at end of year 39,792 46,159

Classified as :

Non-current assets 39,792 19,111

Current assets 27,048

39,792 46,159

As at the reporting date, there were no overdue instalments (2018 : Nil).

Cash and Cash Equivalents

2019 2018

HK$ HK$

Cash at banks 138,359 155,875

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/

’ 5.



Financial Risk Management

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The Fund’s major financial instruments include interest-free loans, bank interest receivable,

fixed deposits and cash and cash equivalents. The risks associated with these financial

instruments are set out below.

(a) Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an

obligation and cause the other party to incur a financial loss. The maximum exposure

to credit risk of the financial assets of the Fund is equal to their caηying amounts at the

reporting date.

To minimise the credit risks arising from fixed deposits and cash and cash equivalents,

all bank balances are placed with reputable licensed banks in Hong Kong. Hence, the

credit risk associated with these financial instruments is considered to be low. As such,

the credit risk on these financial instruments is assessed as not having increased

significantly since initial recognition and the Fund determines the loss allowance

required to be recognised based on 12-month expected credit losses. The Fund has

estimated that 12-month expected credit losses on these financial assets are immaterial

and considered that no loss allowance is required.

The credit quality of fixed deposits and cash and cash equivalents, analysed by the

ratings designated by Moody’s, at the reporting date is shown below:

Fixed deposits and cash and cash equivalents,

by credit rating

Aal to Aa3

Al to A3

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2019

HK$

138,359

305,000

443,359

2018

HK$

433,825

433,825

’, • HONG KONG ROTARY CLUB STUDENTS’ LOAN FUND


For interest-free loans, the Fund closely monitors the granting of credit. The

interest-free loans have been reviewed by the Fund to assess expected credit losses

which are based on an evaluation of collectl bility, ageing analysis of accou的 and past

collection statistics of individual accounts and are adjusted for forward-looking

information that is available without undue cost. The Fund considers that no provision

for loss allowance is required.

(b) Market risk

The Fund is exposed to market risk due to changes in interest rates.

Interest rate risk is the risk of loss arising from changes in market interest rates. This

can be further classified into fair value interest rate risk and cash flow interest rate risk.

Fair value interest rate risk is the risk that the value of a financial instrument will

fluctuate because of changes in market interest rates. Since the Fund’s deposits with

banks bear interest at fixed rates, their fair values will fall when market interest rates

increase. However, as deposits with banks are stated at amortised cost, changes in

market interest rates will not affect their carrying amounts and the Fund’s SU叩lus and

equity.

Cash flow interest rate risk is the risk that future cash flows of a financial instrument

will fluctuate because of changes in market interest rates. The Fund’s exposure to cash

flow interest rate risk is small as interest income from financial instruments bearing

interest at a floating rate is not significant.

( c) Liquidity risk

In the management of liquidity risk, the Fund maintains a level of cash and cash

equivalents that is considered adequate to finance its operations and mitigate the effect

of fluctuations in cash flows .

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’ ’ HONG KONG ROTARY CLUB STUDENTS’ LOAN FUND


6. Capital Management

The capital structure of the Fund consists solely of the accumulated fund. The Fund’s

objectives when managing capital are:

(a) to comply with the Permanent Secretary for Education Incorporation Ordinance; and

(b) to maintain a strong capital base for carrying out the purpose of the Fund as stated in

note 1 above.

The Fund manages capital to ensure that its level is sufficient to fund future loans and

expenditure, taking into account its projected cash flow requirements, future financial

obligations and commitments.

7. Fair Values of Financial Assets

All financial assets are stated in the balance sheet at amounts equal to or not materially

different from their fair values.

8. Possible impact of amendments, new standards and interpretations issued but not yet

effective for the year ended 31August2019

Up to the date of issue of the financial statements, the HKICPA has issued a number of

amendments, new standards and interpretations which are not yet effective for the year ended

31 August 2019 and which have not been early adopted in the financial statements. The

Fund is in the process of making an assessment of the impact expected of these amendments,

new standards and interpretations in the period of initial application. So far, it has

concluded that the adoption of them is unlikely to have a significant impact on the Fund’s

financial performance and financial position.

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hong kong rotary club students' loan fund · 2020. 4. 17. · hong kong rotary club...

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